'Like bombs': Bankrupt company's air bags still out there
Jun 27 2017
Japan's crisis-hit vehicle parts manufacturer Takatasaid it filed for bankruptcy protection in Japan and the U.S. on Monday, after deadly faults in its airbags triggered the auto industry's biggest ever safety recall.
The company says it is facing between US$10 billion and US$50 billion in liabilities from nearly a decade of recalls and lawsuits linked to its defective air bag inflators, which could explode with too much force, sending metal shrapnel into vehicle compartments.
2013: Toyota, Honda, Nissan, Mazda and General Motors recall almost 3.4 million older-model vehicles worldwide due to defective Takata air bags.
Takata in February pleaded in a USA federal court to a felony charge as part of a $1-billion settlement that included compensation funds for automakers and victims of its faulty air bag inflators.
The move cleared the path for a $1.6bn (£1.3bn) deal, which saw Detroit-based Key Safety Systems buy all of its rival's assets, excluding those related to the airbags.
As reported by Reuters, Takata has been at the centre of an ongoing safety scandal for well over a decade, after defective airbags built by the company were linked to at least 17 deaths.
A separate $850 million fund was established to refund costs of air bag recalls and and replacement costs incurred by affected auto manufacturers. According to the company, they would be acquired by the US-based company Key Safety Systems for a couple of billion dollars.
The Tokyo Stock Exchange said its shares would be delisted on July 27.
Honda, a major Takata customer, first sounded the alarm in 2008 that there might be a problem. So far 100 million inflators have been recalled worldwide including 69 million in the USA, affecting 42 million vehicles. The agreement is meant to allow Takata to continue operating without interruptions and with minimal disruptions to its supply chain. They expanded with too much force, firing metal shrapnel into the cabin.
"It's likely every automaker involved in this recall will have to subsidise the process because the value of Takata's assets isn't enough to cover the costs of this recall", said Karl Brauer, executive publisher of Kelley Blue Book and Autotrader.
Takata ended up in this mess after it chose to cut the cost of its airbag inflators by removing a moisture-absorbing desiccant. Takata is unable to disclose the exact total of its liabilities as the company hasn't reached an agreement on how to split the recall costs with the automakers, Nobuaki Kobayashi, a member of the steering committee, said at a news conference on Monday.
By the 1980s, the firm had ballooned into a top global auto parts player on the back of Japan's surging economic clout.
"It has taken a long time to get here", said Makoto Kikuchi, CEO of Myojo Asset Management Co.
Peter Prieto, Court-appointed Chair Lead Counsel for the consumer plaintiffs in the Takata Airbag Product Liability Litigation, released a statement concerning the recent bankruptcy filing by Takata Corp.
The U.S. company would keep "substantially all" of Takata's 60,000 employees in 23 countries and maintain its factories in Japan.
More than a dozen deaths are linked to the company's faulty airbags. They began producing airbags in 1987, managing to become the 2nd leading contributor to the safety devices.
Key said it won't cut any Takata jobs or close any of Takata's facilities.